Hultman v. Mattson

Background

Charlene Hultman alleged that Kenneth W. Mattson, acting for LeFever Mattson, Inc. (LM), fraudulently persuaded her and her late husband to invest $380,000 in Divi Divi Tree, LP, in 2011, and $420,000 in Specialty Properties Partners, LP, in 2013. She alleged that LM was Divi’s general partner and that KS Mattson Partners, LP, was Specialty Properties’ general partner. She also alleged that she received monthly distributions from both investments until April 2024.

Hultman sued Mattson, KS Mattson, LM, Divi, and Specialty Properties. Her claims included securities fraud under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5, financial abuse of an elder under California law, fraud, breach of fiduciary duty, conversion, constructive trust, and declaratory relief. She sought monetary damages, including the return of her investments and punitive damages.

Hultman moved for a temporary restraining order and a preliminary injunction. The court denied the temporary restraining order but issued an order requiring the defendants to respond to the request for a preliminary injunction. Mattson and KS Mattson agreed to an injunction barring them from selling or transferring any of Hultman’s ownership interest in Divi Divi Tree or Specialty Properties without a further court order. The court approved that agreement. LM and Divi opposed Hultman’s request. Specialty Properties had been served but had not appeared or responded.

Legal standard

A preliminary injunction is an extraordinary remedy. A plaintiff must show a likelihood of success on the merits, likely irreparable harm without the injunction, a favorable balance of equities, and that the injunction serves the public interest. The court may balance these factors only if the plaintiff makes a required threshold showing on each factor.

Court’s reasoning

The court denied the motion because Hultman did not show that she was likely to suffer irreparable harm. She did not claim harm other than economic loss, and monetary injury is ordinarily not considered irreparable.

The court recognized that economic harm can sometimes qualify as irreparable harm. But Hultman did not argue that sovereign immunity or another legal rule would prevent her from recovering damages. She also did not show that defendants were hiding or dissipating assets to avoid a judgment, had indicated that they could not satisfy a judgment, or were likely to become insolvent. Her assertion that there was a “real possibility” that defendants could not pay was insufficient because the required showing was that irreparable harm was likely, not merely possible.

Disposition

The court denied Hultman’s motion for a preliminary injunction and did not reach the parties’ remaining arguments. The injunction entered by agreement with Mattson and KS Mattson remained in effect. The court made no ruling regarding discovery.